Key points:
WTI (Symbol: USOUSD) and Brent crude oil (Symbol: UKOUSD) declined to $80.5 per barrel and $84.13 per barrel respectively on Thursday, extending the retracement from recent highs.
This drop is mainly triggered by an unexpected rise in US crude stockpiles, which has raised concerns about weakening demand in the top oil consumer in the world.
The images above show oil prices dropping, as observed on the VT Markets app.
The latest data from the Energy Information Administration (EIA) revealed that US crude inventories increased by 3.591 million barrels last week.
This sharply contrasts with market expectations, which had forecasted a decline of 3 million barrels. Such a physical stockpile suggests that demand might be softer than anticipated, which is bearish for crude prices.
Market caution ahead of the release of the US Personal Consumption Expenditures (PCE) inflation data also adds weight to the decline. As the preferred measure of inflation by the Federal Reserve, the PCE data could influence the decision making on interest rates.
A higher-than-expected inflation reading could lead to more aggressive rate hikes, potentially dampening economic growth and oil demand.
At the same time in the Middle East, increasing hostilities between Israel and Lebanon, coupled with Ukrainian drone attacks on Russian oil infrastructure, have stoked fears of supply disruptions. Such geopolitical tensions have led to volatility in oil prices.
The recent drop of oil prices highlights the sensitivity to inventory data and broader economic indicators. Traders should brace for continued volatility, especially with key economic data releases on the horizon and ongoing geopolitical tensions. Monitoring these developments will be essential for making informed trading decisions in oil trading.
